Mexico Files WTO Dispute Over Chinese Textile Subsidies

Mexico has added to the current list of World Trade Organization (WTO) disputes involving China, by requesting consultations concerning several measures allegedly taken by China to support the production and export of clothing and textile products.

Mexico confirmed that it had requested consultations because China appears to maintain a wide variety of measures that support such producers and exporters, both directly and indirectly, and that appear to involve subsidies that are inconsistent with China's obligations, including under the Subsidies and Countervailing Measures Agreement and its Accession Protocol.

The information available to Mexico is said to indicate that China's support includes income tax exemptions, reductions and refunds for certain groups of enterprises, particularly those located in designated geographic areas and economic zones and those generating income from the production of certain agricultural goods, including cotton. Businesses are also granted exemptions, refunds and reductions of import duties and value-added tax for purchases of equipment, as well as of certain municipal taxes.

In addition, Mexico mentioned the low-cost loans, extended loan repayment periods and debt forgiveness provided by state-owned banks; preferential prices for land use rights and refunds of associated fees; and specific support, including tax breaks, for the production, sale, transportation, processing, importation, exportation and use of cotton and chemical fibres, which are used in making the thread and the fabric that go into Chinese clothing and textile products.

The request for consultation claimed that the Chinese measures taken to support its industry are "causing or threatening to cause serious prejudice to the interests of Mexico through displacement and impedance of Mexican exports of apparel and textile products to the United States, and through significant price undercutting, price suppression, price depression, and lost sales".

While Mexico is reported to be looking for other countries to join in and add more weight to its complaint, the Chinese Ministry of Commerce only confirmed that it has been received, and that it "will be properly handled according to WTO dispute settlement procedures".

Mexico's action does, however, add a further complaint to the litany of disputes in which China is the respondent, as well as more of its export products which may, eventually, be the subject of anti-dumping and countervailing duties, to add to those on which they have already been imposed, particularly by the US and Europe.